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1.1.1.1.4. Financing of a Group

The Banking Act (Law 84-46 of 24 January 1984) authorized companies, other than banks, to perform treasury operations within a group. Under this law, a group implies the existence of a parent company, which either holds, directly or indirectly, more than 50% of the subsidiaries ‘share capital, or controls the subsidiaries (even if the participation level is lower than 50%). The treasury operations may take place between either the parent company and the other companies of the group, or directly between sister companies.

A holding company may, accordingly, be used to collect excess funds from group companies in order to lend them within the group, the group’s treasury being thereby centralized at the level of the holding company. A specific agreement may be signed in this respect.

Another possibility is for the holding company receiving dividends from profitable subsidiaries to reinvest them in non-profitable subsidiaries, whether through debt financing or through capital increases.